If a non-resident does not have a permanent establishment in Estonia, income tax is withheld when the payment is made, and the non-resident does not have to submit an income tax return.
A non-resident declares income themself if they benefit from transfer of property or business income of non-resident's permanent establishment in Estonia. You can find more information in the article ”Taxation of the profit of a permanent establishment”.
Non-resident's taxable income in Estonia
A non-resident legal person's (which does not have a permanent establishment in Estonia) taxable income in Estonia is:
- business income
- entertainer's or athlete's performance fee in Estonia
- income from rent
- royalties
- interest from common investment fund, the assets of which consist of immovables
- dividends
- gains from the transfer of property
- gambling winnings
- insurance indemnity
- insurance indemnities paid to a non-resident by an Estonian resident insurance company
Income tax is charged on the income that non-residents receive from business in Estonia.
Business is the independent economic or professional activities of a person, the aim of which is to derive income from the production, sale or intermediation of goods, provision of a service, or other activities, including creative or scientific activities.
Income tax at the rate of 10% is withheld from the payment of service fee of a non-resident legal person, and these payments are declared in Annex 2 of the form TSD.
In order to declare, a non-resident recipient must have a registry code issued by the Estonian Tax and Customs Board.
If a non-resident legal person does not have a permanent establishment in Estonia and it is a resident of a country with which Estonia has concluded a valid double taxation avoidance agreement, then the tax reductions of the tax agreement apply when payouts are made. This requires a certificate of tax residency approved by the tax authority of the recipient's (foreign) country.
The certificate of tax residency of a legal person is usually valid for 36 months, and if information about it has been entered into the database of the Estonian Tax and Customs Board, it is not necessary to submit it again each time a payment is made. If there is a certificate of residency, the payer must still declare the fee in Annex 2 of the form TSD, but income tax is not calculated.
You can check the existence of a residency certificate in the register of the Estonian Tax and Customs Board by using the inquiry of non-residency. If there is no valid certificate of residency, the tax rates resulting from the Estonian Income Tax Act are applied to the payment.
If the recipient who is a non-resident legal person has registered a permanent establishment in Estonia, the payer has no obligation to withhold income tax and the recipient declares the taxable profit in Estonia in Annex 3 of the form TSD.
If the non-resident is a legal person located in a non-cooperative jurisdiction for tax purposes, then all income received by it from the provision of services to an Estonian resident will be taxed with income tax, regardless of where the provision or use of the service took place. Income tax is withheld from a payment made to a legal person located in a non-cooperative jurisdiction for tax purposes at the general rate applicable during the tax period (22%).
Income tax is charged:
- on remuneration paid to a non-resident artist or athlete in connection with their performance or competition in Estonia or the presentation of their works in Estonia;
- on remuneration paid to a non-resident third party for the activities carried out by a resident or non-resident artist or athlete in Estonia.
An artist for the purposes of this instruction is an artist or entertainer who receives payment in connection with a public performance (for example, in theatre, concert, radio, television, film, etc.) and thus it is important that the artist themself is a public performer. An artist is not considered here, for example, a painter due to the presentation of their works at an exhibition, a lecturer in training or a director, operator, etc.
An athlete in the meaning of this instruction is a person who receives payment in connection with a public appearance at a competition or other entertainment event held in Estonia. It can be any sport, including athletics, football, bodybuilding, cricket, bridge, cue sports, golf, etc.
The taxation of performance fee does not depend on the number of days or hours the performer stays in Estonia; it is important that the performance takes place in Estonia.
This provision applies to taxation with income tax regardless of whether the recipient has concluded an employment contract, a contract under the law of obligations or acts as a natural or legal person or otherwise. When a performance fee is taxed, it is important whether the person is in and performs in Estonia, including if the performance is broadcast on television, radio, or the Internet. In the latter cases, the basis for taxation of the performer's fee arises only because the capture, filming or recording of the performance took place in Estonia.
The rate of the income tax to be withheld on the performance fee of an entertainer or athlete is 10% if the double taxation avoidance agreement does not provide for more favourable taxation rules.
In a specific double taxation avoidance agreement, there may be various restrictions on the taxation of performance fees in Estonia, in the case of activities financed from the funds of the country or local government of one or both parties to the agreement.
If an athlete or entertainer who is a natural person has been issued certificate A1 from a foreign state, then social tax is paid to the foreign state. If there is no certificate A1, social tax is paid in Estonia. Payments made to a legal person are taxed only with income tax, but not with social tax, contributions to funded pension or unemployment insurance premiums.
Taxable payments made to both natural and legal persons are declared in Annex 2 of the form TSD.
Income tax is charged on non-resident's rental income received from:
- immovable property located in Estonia or
- an object (including a right that has a monetary value, for example a security, usufruct) that has been entered or must be entered in an Estonian register
Income from rent is rent, consideration for establishing a right of superficies and tolerating a real encumbrance, and another consideration received for tolerating a restriction on the use of an object arising from law or a transaction. The rate of income tax to be withheld on rental income is 22%.
If the payer has withheld income tax from rental income on Annex 2 of form TSD, the non-resident recipient is not obliged to submit an income tax return.
In the meaning of the Law of Obligations Act, 20% is deducted from rent received based on residential lease agreement in the income tax return to cover the expenses related to renting. When withholding income tax, the payer cannot deduct expenses from taxable income. To deduct expenses, the recipient of the income must declare the income themself, from which 20% is deducted in the income tax return.
The cost is deducted as calculated and regardless of how much actual costs are documented.
Double taxation avoidance agreements do not limit in Estonia the taxation of rental income from immovable property located in Estonia.
Income tax is charged on the following received by a non-resident as royalties:
- consideration for the grant of use of a copyright of a literary, artistic or scientific work (including a cinematographic film or a video, recording of a radio or television programme, or a computer programme), or for the grant of use of a patent, trademark, industrial design or utility model, plans, secret formulas or processes, or consideration for the transfer of the right to use the above, if the payer of the specified consideration is the Estonian state, a municipality, a resident or a non-resident through or on the account of its permanent establishment located in Estonia, or
- consideration for the grant of use of industrial, commercial or scientific equipment or industrial, commercial or scientific know-how, or consideration for the transfer of the right to use the above, if the payer of the specified consideration is the Estonian state, a municipality, a resident or a non-resident through or on the account of its permanent establishment located in Estonia.
When purchasing software (also digital), the price may include various royalties, but often the buyer does not actually use the copyright of the software but uses the software as a service or product for their personal or business purposes.
When taxing the income of a non-resident software seller, the type of income is determined based on the substantive rights transferred to the buyer. Each specific case is based on specific circumstances, but usually when acquiring software for personal or business purposes, the recipient does not use the copyright of the software, and the fee received by non-resident is not taxed as royalties.
Even if the acquirer of the software has certain restrictions on its use, but the software is used only for the acquirer's personal or business purposes, it is usually not a royalty. The said income of a non-resident may be taxed as a service fee or as gains from the transfer of property.
If the payer and the recipient of royalties have been connected to each other for a continuous period of two years, with at least 25% participation in the share capital, the royalties paid directly to a company resident in a Member State of the European Union or Switzerland, or through a permanent establishment of such company registered in a Member State of the European Union or Switzerland, are exempt from income tax.
The exemption does not apply to the portion of royalty that exceeds the value of similar transactions between unrelated parties. Therefore, only that part of royalty, which would be paid by independent persons under similar conditions, is not taxed in Estonia.
The rate of income tax to be withheld on royalties is 10%. Depending on the country, the tax agreement may provide for a lower rate than the Income Tax Act, for example, a 5% tax rate is provided for equipment rental in many countries or a tax exemption in Estonia. The concept of royalties in the tax agreement may differ from the concept in the Income Tax Act.
To apply the preferential rate of the tax agreement, the certificate confirming the residence of the recipient must be entered in the database of the Estonian Tax and Customs Board. If the payer has withheld income tax from royalties at the rate prescribed in the Income Tax Act or the tax agreement, the non-resident recipient is not obliged to submit an income tax return.
As a rule, interest is not taxed in Estonia as income of a non-resident.
At the payer level, the part of interest that significantly exceeds the amount of interest payable on similar debt liabilities under market conditions at the time the debt liabilities arose and the interest was paid, is taxed according to the transfer price provisions.
As an exception, only the interest received by a non-resident in connection with a holding in a common investment fund or in another pool of assets, of whose assets more than 50% accounted, at the time of the payment of the interest or during any period within the two years preceding it, directly or indirectly for immovables or construction works as movables located in Estonia and in which the non-resident had a holding of at least 10% at the time the interest was received, is taxed as income of a non-resident. In the latter case, the rate of income tax to be withheld is 22%, tax treaties with the United States, Greece and Vietnam reduce it by 10%.
In Estonia, beginning from 2025, dividends received by a non-resident legal person from an Estonian resident company are not subject to income tax, as the tax relief for regularly paid dividends, the lower income tax rate of 14/86 on dividends, and the 7% rate of withheld income tax on dividends paid to natural persons no longer apply.
Starting from 2025, dividends are only taxed at the company level in Estonia with income tax at the rate of 22/78.
As an exception, dividends received by a non-resident natural person from an Estonian resident company are subject to income tax, according to a transitional provision, if they were received at the expense of a dividend taxable at a lower tax rate (14/86) until 2024.
The payer of the dividend must submit form INF 1 to the Estonian Tax and Customs Board and declare the recipients of dividends on it.
To declare dividend payments (including those from which income tax is not withheld) on form INF 1, the Estonian registry code of the payee is required – either the Estonian business registry code or the registry code issued by the Estonian Tax and Customs Board. About issuing registry codes to non-residents
Taxable gains from the transfer of property
Non-residents pay income tax on profits if they transfer:
- Immovable property located in Estonia
An item of immovable property is a delimited area of land, or a plot of land, the important parts of which are things permanently connected to it (buildings, growing forest, other plants, unharvested crop), which together with the land form separate properties. - Movable property entered in the Estonian register
Where an item of property is not an item of immovable property, it is an item of movable property. - Timber felled on an immovable located in Estonia
The following is timber: felled tree and stem; the part of stem acquired by means of cross-cutting the stem; slash.
The profit from the sale of timber can be taxable as gains from the transfer of property or as business income – as a result, the calculation and declaration of taxable income differs. The gains from the transfer of felled timber can be carried forward for up to three subsequent tax periods. - the transferred real right or right of claim, which was related to immovable property or a construction work as a movable, which is located in Estonia
This can be, for example, the right to cut standing crop, the gains of the transfer of which can, as an exception, be carried forward for up to three subsequent tax periods. - a holding
Gains from the transfer of a holding are taxed with income tax if the holding was transferred or returned or liquidation proceeds were paid in a company, in a common investment fund or in another pool of assets, of whose assets more than 50% accounted, at the time of the transfer or return or liquidation during any period within the two years preceding it, directly or indirectly for immovables or construction works as movables located in Estonia and in which the non-resident had a holding of at least 10 per cent at the time the transaction was made.
Income tax must also be paid in Estonia if:
- gains were derived upon liquidating a common investment fund or another pool of assets;
- a non-resident derives gains upon reducing the share capital of a public limited company, a private limited company or an association or contributions to a general or limited partnership as well as upon redeeming or returning shares or contributions or is paid liquidation proceeds payable upon liquidation of a resident legal person in the part that exceeds the acquisition cost of the holding (shares, contribution), in the part that is not taxed in the Estonian company.
Gains from the transfer of property exempt from income tax
Income tax does not have to be paid in case of:
- exchange of a holding in the course of a merger, division or transformation of companies;
- increase or acquisition of a holding by way of a non-monetary contribution.
About the gains from the transfer of property in double taxation avoidance agreements
As a rule, the Conventions for the Avoidance of Double Taxation with Income Tax (tax treaties) concluded between Estonia and foreign countries stipulate that gains derived from the transfer of property shall be taxable only in the state of residence of the beneficiary, unless immovable property situated in Estonia and holdings in an Estonian company whose assets consist mainly of immovable property situated in Estonia is transferred.
If a non-resident transfers property that is in no way connected to immovable property located in Estonia (land, apartment, forest, etc.), the tax treaty exempts the non-resident's income from income tax in Estonia.
Gains from the transfer of immovable property is taxed as income of a non-resident in Estonia if the immovable is located in Estonia. Also, the gains from the transfer of a holding in a company whose assets mainly consist of immovables located in Estonia are taxed in Estonia. Although gains from the transfer are taxed in Estonia according to the location of the immovable property, the tax treaty does not exempt a non-resident from taxation of the same gains in its home country. In the foreign country where the non-resident is a resident, the income tax calculated in the foreign country on the same income is reduced by the Estonian income tax, i.e. in the foreign country, the resident of the foreign country must pay the difference by which the foreign income tax is higher than the Estonian income tax.
The method of tax exemption in the country of residence is established only in some of the tax treaties concluded with other countries, which means that if the same gains are taxed in Estonia, you do not have to pay additional income tax in the home country due to the provisions in the tax treaty.
Treaties with tax exemptions
- Albania
- United Arab Emirates
- Bahrain
- Bulgaria
- Georgia
- Guernsey
- Netherlands
- Hong Kong
- Israel
- India
- Japan
- Jersey
- South Korea
- Kyrgyzstan
- Cyprus
- Lithuania
- Luxembourg
- Macedonia
- Isle of Man
- Mauritius
- Mexico
- Serbia
- Switzerland
- Thailand
- Turkmenistan
- Uzbekistan
- Vietnam
Obligations of non-residents upon transfer of property
A non-resident who does not have a permanent establishment in Estonia declares the gain from the transfer of immovable property located in Estonia in table 3.1 of form V1.
Taxable gain = income – acquisition cost – transferring costs
Income tax = gain × 22%
Income, acquisition cost and cost related to transfer are indicated separately on the tax return.
| How to calculate | |
|---|---|
| Income | The income from the transfer transaction is indicated in accordance with the sales contract or other similar document, without deducting any expenses. |
| Acquisition cost | Acquisition costs are all the certified expenses incurred, including the commissions and fees paid, by a taxpayer for obtaining, improving and supplementing property. Acquisition cost is declared not in the tax return of the year in which the cost was incurred, but in the year of benefiting from the transferred property. |
| Costs related to transfer | Costs related to transfer can be notary fees, state fees, the cost of property valuation, or if it was necessary to come to Estonia for the transfer, then also travel costs (plane or ship tickets) related to the transfer. There must be a document proving the expenses if the Estonian Tax and Customs Board asks for it. |
| Costs related to the transfer of the right to cut standing crop and felled timber | In the case of transfer of the right to cut standing crop and felled timber, the costs related to transfer are the costs of reforestation, the costs of logging and transportation paid as a service fee. The taxpayer has the right to deduct these costs from the gains derived from the transfer of the right to cut standing crop and felled timber in the same or three following calendar years. |
- Deduction of documented expenses
A non-resident has the right to deduct documented expenses directly related to the sale or exchange of property, such as brokerage and notary fees, from the gains received.
The gain from the transaction is declared according to the receipt of taxable income, not according to the expenditure. - Deduction or carry forward of loss from transfer of securities
Loss from the transfer of securities can be deducted from gains from the transfer of securities subject to income tax in Estonia or carried forward to following periods.
In order to carry forward the loss and deduct it from the gains, non-residents submit the income tax return form V1. A resident of another contracting state of the European Economic Area (EEA) can declare deductions on the income tax return of an Estonian resident natural person. In other cases, the loss cannot be carried forward and does not have to be declared.
A non-resident declares the gain from the transfer of immovable property located in Estonia in table 3.1 of form V1. When transferring immovables, the number of registered immovable must also be indicated on the tax return.
A resident of another contracting state of the European Economic Area (EEA) can declare gains from the transfer of an immovable located in Estonia on the income tax return of an Estonian resident natural person. In order to calculate the amount of basic exemption, foreign income that is not taxed in Estonia must also be declared.
The deadline for submitting tax returns is 30 April of the year following the year of receipt of income.
Tax returns can be submitted to the Estonian Tax and Customs Board:
- sent as digitally signed to the e-mail address [email protected]
- in the e-services environment e-MTA. Completed and signed tax returns can be uploaded in the "Communication" menu item
- in the nearest service bureau of the Estonian Tax and Customs Board
- by sending it by post at Lõõtsa 8a, 15176 Tallinn
After submitting the tax return, we will send tax information to the non-resident, which includes, among other things, the amount of tax to be paid and the personal reference number required to pay the tax.
If the reference number has been issued, it can be checked in the search of personal reference number on our website either on the basis of the business registry code or the registry code issued by the Estonian Tax and Customs Board. Each person always has only one reference number for payment of all taxes.
The Estonian Tax and Customs Board does not issue tax notices to non-residents.
The income tax calculated on the basis of the tax return is paid to the bank account of the Estonian Tax and Customs Board by 1 October of the year of submission of the tax return.
Tax exemptions arising from tax agreements
Taxation of non-resident's income in Estonia is affected by bilateral conventions for avoidance of double taxation and prevention of fiscal evasion (tax agreements). The list and full texts of tax agreements that have entered into force are available on the website of the Ministry of Finance “Double Taxation Avoidance Agreements”.
Tax exemptions or benefits resulting from the tax agreements apply if the recipient's residence in a country that has concluded a tax agreement with Estonia is proven by a document from a foreign tax authority. For this purpose, a residence certificate certified by a foreign tax authority must be submitted to the Estonian Tax and Customs Board.
If the certificate of residence has been submitted to the Estonian Tax and Customs Board and entered into the database of the Estonian Tax and Customs Board before the declaration is submitted, the more favourable tax rate resulting from the tax agreement is calculated immediately when the tax declaration is submitted.
As a rule, the certificate of residence of a legal person is valid (unless otherwise stated on the certificate) for 36 months, and during the period of validity of the certificate it can be used for all payments by all payers.
The validity of residency certificates can be checked using the inquiry of non-residency.
The payer is still obliged to declare the tax-exempt income of a resident of a foreign country based on a tax agreement, which is taxable to a non-resident based on the Income Tax Act, in Annex 2 of the form TSD.
A “non-cooperative jurisdiction for tax purposes” is a jurisdiction included in the approved “EU list of non-cooperative jurisdictions for tax purposes".
If a country with which Estonia has concluded a double taxation avoidance agreement should be entered in the EU list, it must be considered that according to subsection 5 of § 6 of the Income Tax Act, the foreign agreement applies if the foreign agreement has more favourable conditions for income taxation than those stipulated in the law.
This affects the application of subsections 3 and 13 of § 29, clause 11 of § 41, clauses 1 and 3 of subsection 11 of § 50, clauses 2–5 of subsection 2 of § 52, clause 3 of subsection 3 of § 53 of the Income Tax Act from 01.07.2021.
Income tax is withheld from fees paid to legal persons located in non-cooperative tax jurisdictions for services provided to Estonian residents. The taxation of non-business-related payments with corporate income tax is based on the list of non-cooperative jurisdictions for tax purposes.
According to the amendment, income tax exemption is not applied to dividends paid forward by an Estonian resident company and profit attributed to a permanent establishment if the company paying the dividend or the permanent establishment is located in a non-cooperative jurisdiction for tax purposes.
Countries included in the list
since 17 February 2026
American Samoa, Anguilla, Antigua and Barbuda, Belau, Guam, Panama, U.S. Virgin Islands, Vanuatu, Russian Federation, Viet Nam, Turks and Caicos Islands
SINCE 8 FEBRUARY 2025
American Samoa, Anguilla, Antigua and Barbuda, Belau, Fiji, Guam, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands, Vanuatu, Russian Federation
Since the EU list may be changed twice a year and therefore different jurisdictions may be included in the EU list during the tax period of a natural person, the most favourable EU list for the taxpayer is used. This means that if a jurisdiction is removed from the EU list during the tax period, § 22 of the Income Tax Act will not apply to the income of the legal person located there. At the same time, if a jurisdiction that was not on the EU list as of February is added to the EU list in October, § 22 of the Income Tax Act will not apply to the income of the legal person located there.
Last updated: 29.04.2026
